United Fresh praises new rule clarifying trust rights under PACA

by Joan Murphy | April 12, 2011

WASHINGTON -- (Updated) --The U.S. Department of Agriculture responded to the produce industry Tuesday, April 12, with a final rule clarifying that the Perishable Agricultural Commodities Act's post-default agreements do not mean that a company waives or forfeits its rights to the PACA Trust.

Robert Guenther

Effective April 13, produce companies will follow new regulations from USDA that allow, in the event of a default in payment, a seller, supplier or agent to enter into a scheduled agreement for payment of the past-due amount without being locked out of the PACA Trust.

PACA provides for an administrative forum to handle disputes over produce transactions for buyers, sellers, dealers and brokers within the fruit and vegetable industry. But the produce industry asked USDA to step in with new regulation when court decisions interpreted post-default agreements as extending payment terms, thereby waiving a company's Trust rights.

Last June, USDA tried to fix the issue in a proposed rule, but it "really didn't hit the nail on the head," said Robert Guenther, senior vice president of public policy for the United Fresh Produce Association. If the proposed rule had gone into effect, it would have discouraged companies from negotiating payment terms and forced them to file a court claim every time companies were 30 days past due, he said.

Soon after the proposal was published, United's PACA Trust Working Group issued a white paper on the issue and urged its members to comment on the program.

USDA issued its final rule April 12, saying it recognized that the proposal "could be interpreted broadly to prohibit all post-transaction agreements."

"It is our interpretation of the statute and regulations that post-default agreements are not an extension of the 30-day maximum time period for pre-transaction agreements that would result in a waiver of the seller's Trust rights; post-default payment agreements are an attempt to collect a debt that remains due until fully paid," USDA said in the April 12 Federal Register.

The new rule also strikes two items disliked by the produce industry: the 180-day cap for post-default payment plans, and a requirement that the post default agreements must be in writing.

"We are extremely pleased that the PACA Trust final rule issued by USDA has agreed with the industry comments and adopted important changes urged by United Fresh and our allied produce partners," Mr. Guenther said in an April 11 statement. "This change is a very big victory for United Fresh and our members, and will reduce the significant financial burden of potential litigation and collection fees."